Trevor Rees-Jones: The Wildcatter
He left a law career to search for oil and gas on a speculative basis, and once drilled 17 dry holes in a row. He never gave up, though, and today he’s a multibillionaire “throwback” to the great Texas energy legends.
The under-the-radar dinner at Dallas’ Petroleum Club with top Chevron officials and the governor from the Northeast capped a busy day for energy entrepreneur Trevor D. Rees-Jones.
A few hours earlier, Texas Gov. Rick Perry and Rees-Jones—the founder, president, and CEO of Dallas-based Chief Oil & Gas—had hosted a reception of top business executives for the Republican Governor’s Association at Rees-Jones’ Park Cities mansion.
The dinner that followed in downtown Dallas was a heavyweight affair as well.
Chevron was buying 228,000 acres in the Marcellus Shale natural-gas play from Chief and its Marcellus partner, Tug Hill Inc., and there were issues about the transaction to discuss.
Among those breaking bread with Rees-Jones at the exclusive private club: Pennsylvania Gov. Tom Corbett, whose state is home to a good portion of the Marcellus gas field; Tug Hill founder Michael Radler, who doubles as Chief’s COO; and Gary P. Luquette, president of Chevron North America Exploration and Production Co.
Looking back on this particular day, and recent others like it, the Chief CEO says: “I’m riding at a pretty high altitude now.” Which may be an understatement.
Rees-Jones, 60, was ranked on Forbes’ latest list of the 400 richest Americans with an estimated net worth of $3.3 billion, up from $3 billion the year before. The Highland Park High School graduate earned the money drilling mainly for natural gas in shale deposits in North Texas, and elsewhere, with his 17-year-old company, which has grown to employ about 120. He’s also become one of the region’s foremost philanthropists, giving away tens of millions of dollars to nonprofit groups.
Often described by associates as a “bigger than life” personality who will seal a deal on the strength of a handshake, Rees-Jones has emerged along the way as a modern-day Texas wildcatter, a 21st century energy legend in the mold of H.L. Hunt, “Dad” Joiner, and Monty Moncrief.
“He’s the best partner we’ve ever had, and I’ve had hundreds of partners,” says businessman Ross Perot Jr., whose Barnett Shale gas field in Fort Worth sold for $1.3 billion after Chief developed it. “Shale plays are sweeping the nation now, but it all started in Fort Worth with guys like Trevor. It was little companies, little guys, risking their capital, and they changed the world. Trevor is a classic great businessman who bet it all on a dream, and it worked.”
The Chief CEO, for his part, says he’s mostly been “awfully fortunate.”
Risk and Reward
Rees-Jones, who grew up in University Park, didn’t set out to be an energy entrepreneur.
He was the oldest of three children—he has one brother and one sister—born to a lawyer-father and a housewife-mother. As a teenager Rees-Jones (the name is of Welsh origin) was an Eagle Scout, which “took a lot of work,” recalls Jim Francis, a Dallas businessman and Republican operative whose younger brother was good friends with Rees-Jones growing up.
Francis’ father and Rees-Jones’ father were law partners and hunting buddies, Francis remembers, and both families lived on Centenary Avenue. “All the Rees-Jones kids were just good kids,” Francis says.
After graduating from Highland Park High, Rees-Jones went on to earn a B.A. degree from Dartmouth College and a law degree from Southern Methodist University. Then he worked for more than five years as an oil-and-gas bankruptcy lawyer at Dallas’ Thompson & Knight firm. Eventually, though, “I just realized that being a lawyer was not my calling,” Rees-Jones says. “I felt more interested in putting deals together from a business standpoint: getting things done, getting wells drilled, finding a gas field, establishing production. I was just intrigued by that more than researching the law and writing briefs.”
When he left Thompson & Knight, Rees-Jones says, he had $4,000 in the bank that he parlayed into a $48,000 line of credit from Republic National Bank. Over the next decade he worked in the oil and gas fields drilling or investing in more than 400 “high-risk” exploratory wells, mostly in Southwest and Central Texas. At one point, he drilled 17 dry holes in a row.
“Every two or three years, I’d find a new little field to get on down the road. Then you’d get down the road and be broke again,” Rees-Jones says. “I loved it.”
He sometimes got discouraged during this period, but he never quit. “I was single back then, and I could take a deal with risk,” he recalls. “But when I got married, I had to find a way to lower my risk profile.”
The result of that decision was Chief Oil & Gas, which Rees-Jones started in 1994 with four shareholders for “just a couple hundred thousand dollars.” Early on, he says, the company focused on “picking the last meat off the bones” of the remaining gas reserves from George Mitchell’s wildcatting partnership in the Boonsville gas field in Wise County. “It was pretty low-risk,” Rees-Jones says of the Boonsville play. “But it was also pretty depleted.”
It wasn’t until 1999 that Chief turned its attention to the Barnett Shale, a so-called “unconventional” gas field stretching over parts of North and Central Texas including Tarrant, Denton, and Parker counties. Mitchell’s company, as it happened, was pioneering a new drilling technique there called hydraulic fracturing, or “fracking,” to extract natural gas trapped inside the area’s shale rock formations.
Chief jumped headlong into this revolutionary technology—“we were a gnat flying around the big elephant,” Rees-Jones says—including the use of horizontal as opposed to vertical drilling, at the same time that natural-gas prices were taking off. By the mid-2000s, Chief had become the second-largest producer in the Barnett and the biggest in Tarrant County.
It was around this time that the Dallas wildcatter struck the first of the big, extraordinarily lucrative natural-gas deals that would make him rich.
In 2006, Rees-Jones sold Chief’s leasehold and production assets in the Barnett to Devon Energy, and its pipeline and midstream assets to Crosstex Energy, for $2.63 billion in cash. He then reinvested some of those proceeds in an existing minerals-drilling partnership with Ross Perot Jr.’s Hillwood Energy at Fort Worth’s AllianceTexas development. That partnership sold out to Quicksilver Resources in 2008, for $1.3 billion.
Meantime, Chief had expanded its natural-gas exploration, development, and production activities beyond Texas to the massive Marcellus natural-gas shale play in Appalachia. There, Chief and Michael Radler’s Tug Hill investment firm leased the mineral rights on some 650,000 acres in Pennsylvania, West Virginia, and Maryland.
Two years ago, the companies agreed to sell 30 percent of their Marcellus interests for $406 million to Canada’s Enerplus Resources Fund. In 2010, Chief and Tug Hill sold another chunk of the Marcellus assets to Exco Resources for $459.4 million. Then, earlier this year, they completed the 228,000-acre sale to Chevron Corp. That left Chief and Tug Hill with about 125,000 acres of Marcellus leasehold, in what Rees-Jones calls a “highly productive area.” While the value of the Chevron transaction was not disclosed, Forbes writer Christopher Helman recently wrote, “My estimate is that the deal means another $1 billion pay day for Rees-Jones.”
Despite his record of such successful, multimillion-dollar deals, the Chief CEO scoffs at the idea that he was able to “time” the sales to Devon and Crosstex, for example. “I wish I could take credit for that, but it’s impossible to do,” Rees-Jones says. “Just as you can’t pick the right time to sell a stock, we didn’t realize that the market was nearing a peak, or was anywhere near a peak, at the time we sold in 2006.
“We were not trying to time the market, although in hindsight the natural-gas price peak was ’06 to ’08. At the time of the Devon sale, prices were around $9 [per million cubic feet of gas]. We actually accomplished another sale—the Alliance leasehold interest with the Perot family—right before the market crashed, when the price was up to around $13/Mcf. “From 1984 to ’94, I would have been happy to count on gas at $2/Mcf,” Rees-Jones goes on. “In 2002, ’03, ’04, things had gotten absolutely crazy [with higher prices], and that’s one reason we tried to sell. We were made very nervous by this explosion in prices. Anytime you see the price of anything multiplying by five or six or seven times, you’re nervous about a bubble. These days we’re at an average of $4/Mcf, but that’s still twice what it was in the 1994 time period.”
Besides an element of luck or happy timing, Rees-Jones’ business success by most accounts has stemmed from a combination of hard work, personal integrity, steely determination, and good-ol’-boy charisma.
“He’s a big personality. He kind of has that Texas drawl, so when he walks into a meeting, people are drawn to him,” says Mike Allen, the founder and president of Dallas-based Providence Energy Corp., who’s been a partner with Rees-Jones in a number of energy deals.
“He’s also very approachable. When he comes into our office, he literally talks to everyone. That makes you like working for him. At the same time, he’s intensely competitive. He just doesn’t like to lose. So, the pressure’s on you not to lose.”
Radler of Tug Hill agrees that while Rees-Jones may be “bigger than life” and an “honest, real person,” he’s also a canny businessman.
“He’s probably one of the toughest negotiators I’ve ever dealt with,” Radler says. “He’s got his own ideas about the way things should go. He’ll say, ‘This is the way I think it should be structured.’ He’s fair, though, and, once an [agreement] is made, it’s set in stone.”
“He’s been in the right place at the right time,” another associate says. “But he didn’t stop—he did it again. So let’s put it this way: When Trevor calls, I jump.”
Just about everyone you talk with about the Chief CEO says his word is his bond, and that his handshake can be all it takes to finalize a deal. “If you shake his hand, he’s old-school—he’s golden on that,” says Allen. Adds Radler: “We’ve been partners for six or seven years, investing over $1 billion. But we don’t have any legal partnership documents—just a handshake.”
Clinching multimillion-dollar deals with a handshake was a hallmark of the traditional Texas wildcatter, historians say. But these days, businessmen like Perot contend, it’s about as rare as a 70-degree July afternoon in Dallas . “You’ve always got guys out there who will start wriggling around on you,” Perot says. “And a lot of our partners are institutions, so even if they say something’s going to get done, you’ve got committees and boards to go through before it happens. When Trevor says it’s done, it’s done.”
Not everyone agrees that the Chief CEO is such a straight-shooter, however. In fact, a couple of his former investors have filed lawsuits alleging that Rees-Jones made them “low-ball” offers to buy out their minority stakes in the company.
One of those investors, D. Bobbitt Noel Jr., sold his 5.76 percent stake in Chief Holdings LLC back to Chief for $6.5 million in 2004. The other, Robert B. Allen, accepted about $8.2 million for his 7.2 percent interest in the company the same year. Both men, who originally invested less than $1,000 apiece in Chief, charge that Rees-Jones underpaid them, withholding key information leading to the company’s $2.6 billion sale to Devon two years later.
A Houston jury found in Noel’s favor in March, and a Texas state district judge entered a $196 million judgment, including $116 million in damages, against Rees-Jones and Devon two months later. In July, Houston’s 1st Court of Appeals overturned a lower court’s ruling that had barred Allen’s claims, essentially allowing the case to move forward.
Rees-Jones’ lawyer, Craig Haynes of Thompson & Knight, has disagreed with the latest outcomes in both cases, saying a rehearing would be requested in the Allen case, and that Rees-Jones and Chief would appeal the Noel verdict.
Says Rees-Jones: “It’s all very disappointing.”
In a press release announcing the Noel appeal, Haynes was quoted extolling a number of Rees-Jones’ virtues, including his “significant contributions to the community, along with his wife Jan, through the Rees-Jones Foundation.”
On that point, there’s no disagreement.
In addition to the couple’s private multimillion-dollar donations, the $325 million Rees-Jones Foundation has given tens of millions of dollars to North Texas causes, with a special focus on children and families with limited resources. Among its gifts: $25 million to the Circle Ten Council of the Boy Scouts of America, $25 million to Parkland Hospital, $25 million to Dallas’ Perot Museum of Nature & Science, $5 million to the Dallas Children’s Advocacy Center, and $5 million to the SPCA of Texas.
“Makin’ money’s fun,” Rees-Jones says, “but givin’ money away’s as much or more fun.” In the future, he adds, it’s going to be “important to shift more of our resources into our foundation.”
Separately from the foundation activities, Rees-Jones has also pumped millions of dollars into Republican political causes, supporting Gov. Perry’s re-election effort, the group called Texans for Lawsuit Reform, and American Crossroads, an independent outfit associated with GOP strategist Karl Rove. “You’re looking at a guy who is financially powerful and he’s a smart guy, and you’re lucky to have those kinds of people involved,” energy billionaire T. Boone Pickens told The Dallas Morning News. “So I think you are going to see more of Trevor in the future. It isn’t a one-off deal.”
While Rees-Jones is already plotting his next big business move [see “Fracking for Oil” on this page], he also seems to be looking forward these days to enjoying the fruits of his labor. An avid hunter and fisherman, he often repairs to the family’s Cook Canyon Ranch near Ranger, in Central Texas. To celebrate his 60th birthday one evening in August, the Eastland County ranch was the site of a party for 900 guests. Twenty-five or 30 private jets were parked on the property’s runway tarmac, Jim Francis recalls, and entertainment was provided by the Blues Brothers and the Eagles rock group. The partygoers included Dallas business titans like Pickens, Perot Jr., and TRT Holdings founder Robert Rowling, as well as actress Heather Locklear. Rees-Jones has long had a “crush” on Locklear, Francis explains, so his wife Jan good-naturedly flew the actress in for the event.
“Nothin’ makes me feel better than wakin’ up at my ranch,” Rees-Jones says. “I’m tryin’ to turn more of our ranch land into productive uses. I like finding arrowheads. I do a lot of mountain biking. I like pretending that I’m there 200 years ago.”
Such sentiments seem in keeping with Rees-Jones’ reputation as a “throwback” of sorts—as an old-fashioned man from the days when boldness, optimism, guile, and independence really did define the Texas spirit. Pointing to Rees-Jones’ wildcatting acumen, State Rep. Dan Branch has called him “a modern legend.”
“I’ve known Dan for a long time, and he’s an awfully kind man,” Rees-Jones says, when asked about Branch’s comment. “I can’t say what I am or not. But I can tell you that developing these shale plays that brought about a revolution in the oil and gas business, I’ve been awfully fortunate to have been involved. I have felt at times, throughout the last decade, like an early-day wildcatter, with a whole lot of new oil and gas left to find.”
Like an early-day wildcatter, indeed—one who may be flying about as high now as any of the historic legends ever did.